Photo credit: www.cnbc.com
Two decades ago, Jawed Karim uploaded a brief 19-second video titled “Me at the Zoo” to YouTube, marking a transformative moment in the landscape of online video sharing. This clip, depicting Karim at the San Diego Zoo, was the inaugural video on a platform that he co-founded with Steve Chen and Chad Hurley. The trio later sold YouTube to Google for $1.65 billion in 2006, and since then, it has transitioned from a basic video-sharing application into a formidable global media entity.
Analysts from MoffettNathanson estimate that if YouTube functioned as an independent business, its valuation would range from $475 billion to $550 billion. The platform ranks as the second-most visited website in the world, trailing only Google, with over 20 trillion videos uploaded, encompassing diverse formats such as music, Shorts, and podcasts, as reported by YouTube in April.
Michael Nathanson, a co-founder of MoffettNathanson, remarked on YouTube’s status as a leading player in the streaming industry, noting, “They don’t have to invest in content. They just hope that the creator community comes to them and builds their business.” Furthermore, projections suggest that YouTube could become the highest-grossing media company by 2025, surpassing Disney in revenue. Recent data from Nielsen indicates YouTube leads in total TV viewership, capturing 12% of the time watched in comparison to Disney, Fox, and Netflix.
Brad Erickson, an analyst at RBC Capital Markets, supports MoffettNathanson’s assessment but cautioned that evaluating internet companies solely through a sum-of-the-parts approach may not always yield accurate reflections of their value. According to Erickson, YouTube’s integration within Google’s broader ecosystem enhances its ability to target advertisements effectively, leveraging extensive contextual data about its user base.
YouTube remains integral to Google’s operations, especially as the company’s primary revenue source, Search, faces increasing competition from emerging technologies like AI-driven chatbots. Strategically, YouTube, alongside Google Cloud, is essential for Google’s future growth and resilience against potential declines in search revenue. Together, these platforms represent over 30% of Alphabet’s total revenue and are its fastest-growing segments.
The growth of YouTube is bolstered by its subscription services, including YouTube Premium, YouTube Music, and YouTube TV. Current estimates suggest that YouTube Premium and Music have approximately 107 million paid subscribers, with forecasts indicating growth to around 145 million by the end of 2027, while YouTube TV is projected to reach about 11.5 million subscribers within the same timeframe.
The Challenge of TikTok and Antitrust Issues
Among its most significant competitors is TikTok, which surged in popularity during the pandemic in 2020. In response, YouTube developed Shorts, a vertical video feature designed to compete directly with TikTok, accompanied by an advertising revenue-sharing program for creators. Despite this initiative increasing engagement, Nathanson cautioned that the monetization difficulties associated with Shorts may hinder its revenue contributions.
Nevertheless, YouTube continues to be a pillar of the creator economy. From 2021 to 2024, YouTube has compensated creators to the tune of $70 billion, with annual payouts on the rise, as noted by YouTube CEO Neal Mohan.
One such creator is 23-year-old Jacklyn Dallas, who began her YouTube journey at the age of 13 and has since drawn nearly a quarter million subscribers. “Being a YouTuber is the greatest thing of all time,” Dallas expressed, highlighting the vast opportunities afforded to creators today, made possible by YouTube and its audience. Her channel, NothingButTech, features over 500 videos focusing on technology insights and interviews with prominent figures, including Google CEO Sundar Pichai.
Reflecting on her decade-long experience, Dallas noted a seismic shift in creator-audience dynamics and societal perceptions, emphasizing the critical role of data in facilitating a successful content creation journey. “YouTube is like a knowledge game, and anyone can become a creator by learning what makes a great video,” she stated.
Yet, YouTube faces looming challenges tied to regulatory scrutiny over Google’s potential monopolistic practices. A recent federal court ruling determined that Google has maintained illegal monopolies in online advertising, putting YouTube in the spotlight as a pivotal asset that could come under pressure during potential divestitures. Analysts like Andrew Frank from Gartner suggest that Google may be incentivized to promote competition and adjust certain media restrictions, including those on YouTube.
Source
www.cnbc.com